Although the type and quantity of a company’s fixed assets will vary from sector to sector and business to business, fixed assets – including land, office equipments, buildings, patents and machinery – are an essential part of any organization.
Because of this, conducting and maintaining a comprehensive, accurate and up-to-date fixed asset inventory is an imperative part of the fixed asset accounting process. If your company’s inventory is misrepresented, the correctness of all further processes, controls and calculations is put in jeopardy – which could spell disaster for your bottom line.
In short, having a precise picture of your company’s fixed assets could save you thousands or even millions of dollars in costs related to taxes and insurance. Companies with out-of-date balance sheets may be paying property taxes on items that were lost, traded or relegated to the landfill without even knowing it.
A basic fixed asset inventory – also called a register – will consist of items’ purchase dates, costs, expected useful economic life and a detailed description. For a more detailed level of asset tracking commonly used for items that are frequently moved from place to place, an asset tracking component is added to help determine the location of an item at any given time.
This is where radio frequency identification technology comes in. When RFID tags are affixed to individual items, the items’ locations can be tracked without workers having to manually scan the tags, as they would need to with other bar code labels. Strategically placed RFID readers receive electromagnetic waves from an RFID tag’s microchip within its range, allowing the real-time tracking of the item the tag is attached to.
Automating the fixed asset tracking process by using RFID technology in conjunction with inventory tracking software can free up staff time significantly, as well as reducing the likelihood of human error associated with manual inventory methods.
In addition to helping companies track their fixed assets, inventories are also used to calculate the annual depreciation changes that determine net profit and loss in year-end accounts. Information about historical cost and cumulative depreciation is vital when analyzing the potential profit or loss of asset disposal.